Snap reports ‘challenging’ quarter but shares are still rising


CEO of Snap Inc. Evan Spiegel walks into a morning session at the Allen & Company Sun Valley Conference on July 7, 2021 in Sun Valley, Idaho.

Kevin Dietsch | Getty Images

Snap missed Wall Street’s expectations for earnings and revenue, forecasting disappointing revenue growth in the current quarter when it reported first-quarter results on Thursday. However, the daily number of users grew by 18% per year, more than expected.

Snap fell about 4% at one point before recovering to gain more than 7% at one point in volatile extended trading.

Here are the main numbers:

  • Profit per share: A loss of 2 cents vs. expected gain of 1 cent, according to a Refinitiv survey of analysts
  • Revenue: $1.06 billion versus $1.07 billion expected, according to Refinitiv
  • Global Daily Active Users (DAUs): 332 million versus 330 million expected, according to StreetAccount, up 18% year-over-year
  • Average revenue per user (ARPU): $3.20 vs. $3.25 expected, according to StreetAccount, up 16.8% year over year

“The first quarter of 2022 turned out to be more challenging than we anticipated,” Snap CEO Evan Spiegel said in a prepared statement.

Spiegel blamed some of Snap’s problems on macroeconomic conditions during the quarter, including advertisers interrupting their campaigns after Russia’s invasion of Ukraine in February.

Snap said it expected revenue in the June quarter to rise 20% to 25%, lower than Wall Street’s estimate of 28%. It forecasts daily users at around 344 million, exceeding expectations of 341.4 million.

The company estimates adjusted EBITDA in the second quarter to be between breakeven and $50 million.

While the company’s total revenue grew 38% year-over-year, Snap reported a larger net loss and less year-over-year free cash flow during the quarter ended March.

Snap CFO Derek Andersen said other conditions affecting advertising customers include supply chain disruptions, labor shortages, inflation and the impact of rising interest rates.

Snap could continue to cope with a challenging work environment that drives customers to pause their campaigns or cut ad budgets, Andersen said in his prepared remarks.

Snap also faces challenges related to Apple’s 2021 privacy change, which will make it more difficult to target and measure ads on iPhones. Andersen said the tool the company created to improve the problem now accounts for 90% of the company’s direct response ad revenue.

Snap said it reported an unrealized loss of $92 million related to a prior investment that went public last year.

Cloud software provider HashiCorp went public in December, and its stock fell 41% in the first quarter as investors exited the burgeoning technology. Snap invested in HashiCorp in 2018 as part of a $100 million round, but never disclosed the details of its interests in the company.

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